terms of today's policy. it appears that on wednesday there will be a vote in the house. what are your thoughts? >> the era of kumbaya, if it ever existed, it is gone. [laughter] [talking over each other] >> there is no possibility. unless the republicans demonstrate a willingness to kind of laid down and do exactly what the democrats want them to do. i wonder the extent to which he will be able to accomplish anything that he talked about today. >> fighting is not a bad thing if the alternative is surrender to bad policies. although the republicans don't have as much leverage as they sometimes seem to think they do, they should resist and do the best they can without harming the economy. lou: with a brighter

communication and messaging strategy, that would be helpful to the gop. the opposition as much in need these days. thank you very much for being here. that is it for us tonight. we thank you for being with us. please be with us tomorrow night. goododod night from new york. neil: welcome, everybody. i am neil cavuto sitting before what was the parade route and what was a very busy stand with the most powerful people on the planet behind that class and behind that building that is going to be taken down. pie by piece over the next 24 hours. where i am sitting in that building that was in view, the president and e vice president and their families were sitting there. it will be dismantled from scratch.

there is no warehouse where they can put this stuff up. this day we commemorate the president starting his second term. a president who started with a pretty in-your-face agenda, be that as it may, if you thought that the president was going to slow down on some government initiatives, think again. we will get into the details in the second. here is how it was received across the globe. u.s. futures are up about 19 points. similar gains in the s&p 500 and nasdaq. the nasdaq. the first two are already at five year highs. the nasdaq is a long way from that. it has more to do with their currency, the nikkei s up. less to do with the inauguration of barack obama today.

but perhaps it was something that would get in the way of some of the good economic fortunes they see downwind. the markets little dissuaded by anything that happened today. despite concerns that republicans feel that they are going to get the short of the stick -- short end of the stick from the president. chuck schumer is the latest essay, to say, as you know, if it comes to another budget that will be stressful, republicans may not like it, but they will have to deal with it. i will have more on the attitude in the approach of the president. i didn't see anything shocking or the president. he is kind of echoing what he already has said. maybe slightly more directed to the point. maybe something that you would normally see in an address like

this. maybe more inclined for the state of the union address. >> what is interesting though is that a lot of the lines could have been in his campaign speeches. the whole thing about, well, there are a select few that are making it at the top. the rest are getting the scraps. we have to build them up. i heard that in city after city in ohio and florida and colorado and iowa. neil: were you surprised to hear it now. >> are you going to be up late? >> are you going to have a tv dinner over there? neil: it was enough to say that i won this election and i'm going to go with the spending and this will happen.

>> he did, he said that. normally with a campaign speech away and now turn the page and say here's a chance to come together. he did say let's come together, but he also said what he said. which is essentially, i won the election, you have to come to me now. it's a combination of things. it's not just the heat won the election, the first big issue was on the fiscal cliff. he kind of cleaned john boehner squat in terms of taxes and revenues. it was all tax increases. $15 million in spending cuts. republicans have to get their acts together to negotiate better on the debt ceiling and other things. neil: what is the overture on the republican party? saying that they are going to push for a three-month extension? >> sure, what i read in it was

from a pr standpoint in saying that gets all is a bad idea and will hurt the economy. and for economy a year and a half ago. republicans are saying that maybe it's a smart move in the sense that they want to say enough of this pr stunt. let's take the falls off the table but let's get to the real essence of spending cuts. the president is going to keep coming back. but it's more revenue. but it's more tax increases. we knew th in the campaign. neil: there is this paraphrase between the rich and the poor that you alluded to. maybe he has not done this. >> i don't think he is done on more tax increases. neil: more deductions? >> deductions anperhaps more rate hikes. this was alluded to during the fiscal cliff talks by various democratic leaders. at one point john boehner and the president talking about

$1.2 trillion in revenue increases and ended up with 600 billion in revenue increases. democrats feel like they can get more and if you like aking it the president in the strongest position. the final point i will make, they know inside the white house behind us, even though he is feeling strong right now, that there will be a lame-duck pretty soon. he has 12 to 16 months, maybe 18 months at the most, the closer you get to the midterms coming it becomes more of a lame-duck and he has to use his political capital while he has it. neil: that's amazing. ed henry, thank you so much. he is genuinely liked by everyone here. everyone really respects ed henry. despite my best efforts. [laughter] >> let me say that i love fox business network, mostly because you are at the center of it. [talking over each other] neil: he has been here once before dawn.

okay, we have congressman mcclintock here. we think that ed henry was pointing out here. do you get a sense from what he was saying that low, the president feels a little bit emboldened? he may be using this limited honeymooner whatever you want to call it -- he is not ceding an inch. what did you make of that? >> i would agree. we have heard all of this this before. we heard it for years ago. he's made it very clear that he's going to continue to press for a destroying the prosperity of our country. this is a groundhogay where we have another four years of winter ahead of us. neil: what about this for your extension. what do you hope to prove in the

meantime or get the ducks in order to get done so in the meantime. >> i think it's a terrible idea. it obliterates the debt limit until may 19. it gives the most spendthrift administration in this country's history. neil: so you are against a? >> i am against it. the leadership has explained that there is solid ground if i am and it will be the sequestration reduction. those are automatic redctions and we don't have to do anything to make those spending reductions go into effect. which means they are planning on bargaining even with sequestration reduction. neil: do those delayed sequestration cuts if the latest part of that ddal as well? >> what they are saying is that we don't want to fight the debt limit battle with the sequestration battle. neil: icu.

>> it's not bargained away. but they are planning to bargained away. it is pretty clear that they will. they have made it a part of the arguments in favor of this open debt for the next four months. neil: do you think congressman, you think republicans generally have -- but the president has seen him blink too many times and he feels that he can run the table with that? to the good news is the republican house has twice passed budgets that would actually play this nation back on the course to fiscal solvency. it could pay off the entire national debt which is crushing

by the time that today's college graduates are ready to retire. we know what path we need to be on to avert the catastrophe that is consuming grief. it is perfectly clear we ought to extend the debt limit in small increments. within that directory set by the ryan house budget. and anything needed to maintain that trajectory, but that's not what they're doing. neil: okay, congressman. thank you for joining us in and taking the time to be with us. ten minutes after the hour here. the president has made it clear. only two inaugural balls at this particular inauguration. i think he had nine of them four years ago. bill clinton holds the record, i think 25 between 1993 and 1997. do you know? >> i do not. neil: not this guy. he's keeping it limited.

can you imagine if ron paul became president? it would be very different. we would have inaugural outdoor tents. [laughter] one way or the other, it is done. someone is paying for it. we have a lot more coming up, including former massachusetts governor who took himself out of the running. pat buchanan will be joining us and john calder -- john paul and john calder -- john paul dejoria

at a dry cleaner, and john calder -- john paul dejoria we replaced people with a machine. what? customers didn't like it. so why do banks do it? hello? hello?! if your ba doesn't let you talk to a real person 24/7, you need an ally. hello? ally bank. your money needs an ally.

neil: welcome, everybody, from our nation's capital. we are getting a little nervous. sylvania avenue -- we are just hanging here hoping that they keep these lights on behind us. otherwise we will be in the dark. all right? we don't want that to happen. rich edson really doesn't care if it does happen because he understands we are out in the cold. rich edson, with the latest? to . reporter: some 4000 attendees at these inaugural balls.

they are off to a good start. this is for the inaugural ball at the washington convention center. some members and friends and campaign workers who paid for the number of performances. alicia keys started this off a while ago. brad paisley, smokey robinson, john taylor and others. nearly 40,000 people combined for the two official inaugural balls. we expect the first family to arrive shortly. neil: that is a very modern designer talks you are wearing.

reporter: i am wearing ben's warehouse, vintage fall 2008. neil: i deserved that. [laughter] thank you ve much. getting the rebound from people who could actually open up their own tux ito shops. investor john paul dejoria. as well as. neil: thing that i'm not going to give up the principles that got me elected. medicare and medicaid, social security, what do you think?

>> he controls the narrative. republicans will be saying no to spendi. he is an incredibly strong position in terms of the media and the general public. it is really going to be a tough fight. neil: you know, ed henry was here a little while ago. talking about the president once again mentioning the chasm that exists between t very successful and not successful. seemingly holding out the distinct possibility that he is not done with them. even after the tax increases, he is going to follow along what chuck schumer would say. more tax increases to come. how do you feel about that in the impact from that? >> i think that the speech was

political. they can't be that stupid to continue to divide america. whenever i see them hitting those that were successful are those that one, did they forget that that is the american dream? lets all have a shot at making it in life. you know, i started off homeless and made it. when you start dividing people and you have stupid suggestions like that, i also think that ne you have chuck schumer making a statement as a democrat, chuck get elected and has big corporate money behind him. so a lot of what is going on now is political. i do not think the democratic party will spend us to death. they look around and see it what is going on.

neil: they might be more inclined to just continue to attack the rich are far more creative ways to get money from the rich. because i don't think chuck schumer was talking about raising anyone's rates beyond what they are now. how do you feel about that and what will be the fallout from that? >> i think if you ask most people, do you think spending is a good idea, they will say yes. the benefits my spending, even some wealthy people that i know, he is talking about constraints in terms of what they can receive from the government, there is a sense of entitlement that people have people are used to getting money from the government. i disagree. i think we are seeing the president doing what he really believes in. i don't think he has the same point of view that i do about the american dream. and also who's been invited.

he wants a fundamental change in the american system, and i think if you look at how hard he is playing the ball, i think that is what he wants to see. he's getting what he wants to see that it's his second term, so it's his chance to drive it home. neil: one of the things that the president did, he says if i'm so inept at everything am up why is the market continuing to go higher? wise the dow jones and the s&p back to five-year highs? wi-fi life i am such a capitalist killer, the markets are doing okay. >> we have good corporate leaders and business people and independent people. it wasn't a government that built their businesses up or have the trillions they have in cash. it's what they did in spite of the difficulties that they came up with. i'm a true believer in america. with all due respect, the american people, we the people, we can make things happen on her

own. i think the market is reflecting what are the earnings of some of our companies and what are companies doing? small and large alike in the face of the adversity that maybe the government not agreeing about the businesses. that is what business is all about. the businesses are saying that we are still going to do it, we are going to do what we have to do. neil: i would be remiss if i said someone else who made their fortune, like you, in the hair care industry like you have -- michele obama, do you like her hair? do you like her bangs? >> i think she looks great with her hair straight back in a ponytail. neil: you don't like her bangs? >> i say lose the bangs.

neil: it's an appropriate question for y as well grab. what do you say? >> no bangs. [laughter] we found common ground. gentlemen, thank you very much. most women were split half-and-half. most guys really don't care. but it was the topic of conversation. the most talked about fashion point. when we come back, someone who cares about some of the issues. michael dukakis, the former presidential candidate. he ruled out a temporary appointment to the vacated

senate seat of john kerry's. [ indistinct conversations ]

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>> we need a new government or a new century. a government that is smaller and lives within its means and does more with less. >> the commitments that we make to each other ith medicare and medicaid and social security, these things do not stifle our initiative. they strengthen us. [applause] they do not make us a nation of takers, they for yes.

neil: a contrast of two democratic presidents. one with the vision for a streamlined government and the other with just a completely unshackled government. thank you for joining us, michael dukakis. i'm wondering about this approach of two democratic presidents, the government and its role. bill clinton when he was reelected, embracing the smaller size and streamlining it.

and this president embracing this year out of control sites. we had a balanced budget and back to back surplus in what, 50 years? 4.5% unemployment. and i don't think he did it by shrinking the government. i thought that he built a great part of the public and private sector. >> do you think it will pay out? >> we are growing faster than the other strategy, which is what we are seeing in europe.

neil: thank you for entering our questions, you are always very gracious. you would do this in a balanced approach? is that what you're saying? you would want to streamline what had been excessive -- even just in the massachusetts government? massachusetts is very prone to high taxes. now the rich want to hike it even more. isn't that a part of his maricopa? >> well, i think what i liked about the president's speech when it came to foreign policy and national security thing was his comment on the fact that we don't have to live with

perpetual warfare for lives in decades. that could turn out to be one of the most important parts of the speech. we have national security and the defense budget, which i think is wildly out of control. it is a kind of old war budget for a very different era. and i hope that the president and the administration and republicans as well as democrats will take a good look at that. neil: didhe miss an opportunity to do so? i know all about broad visions any spell out some of the details, but this was an opportunity to say that i see the magnitude of our debt. i see the magnitude of our problems. i am not oblivious to this. i want us all to join hands and look at wa to mutually get this down to size without dividing our social classes. i don't know if that opportunity was seized on appropriately

enough today. >> well, i think it was a different kind of speech. but this is a president who has cut spending. he wants to cut more. i wish i could see that desire on a partisan basis, especially when it comes to the defense budget. i think leaving that alone is just absurd. neil: you have to say, governor, that he has curtailed the growth of what it would have been otherwise. but it is still ballooning debt. the fact of the matter is he has done little to address that explosive growth. >> the single most important challenge that we face domestically is getting this economy moving. at this point in time, deep cuts to the budget. you know that and i know that. [talking over each other] you have to raise some revenue if you're going to do with this

problem. but i think the immediate problem has to be getting the economy moving. in the context of a five to 10 year plan, and i'm not talking about phony baloney. i'm talking about serious stuff which begins to balance the budget. we have to get this economy growing. neil: okay, governor, great to chat with you even on the phone. >> i want to know in los angeles where i teach today it was 80 degrees today. [laughter] neil: okay, you don't want that temporary john kerry see? [laughter] >> i have a great job out of college and about 80 students i teach. neil: happy new year to you, sir. good to chat with you. back to my friend rich edson.

he is supposedly weing a tuxedo. i don't buy it. i think it's a suit made to look ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪ into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it. olaf gets great rewards for his small business! pizza! [ garth ] olaf's small busins earns 2% cash back

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neil: welcome, everybody. the president has left the white house for the inaugural balls. one of two of them. nothing has been going on for a couple of hours. rich edson is at one of the balls. the president isn't going to that one first, when h is waiting for is not the one that rich edson is already at. what are your thoughts? reporter: the commander in chief ball is first. it's a lot more exclusive. 4000 members of the military, there is no fee to get in. it was by invite only. the first lady and the president will dance with members of the military.

we are here with 35,000 expected. this is a 700,000 square-foot venue where a number of acts are playing. stevie wonder, john legend, the folks from the tv show "glee", smokey robinson, usher, katy perry. i am surprised, can you hear this from the white house? i know it's across town, but i can barely hear a thing. neil: it is just as well because we have been criticizing you and your reporting, it is always second to none and always outstanding. but you give the impression of wearing a tuxedo earlier. the crew and i have been wondering if it is a very nice

suit made to look like a tuxedo. so from a distance you appear to be wearing an address card designer friendly tuxedo. but i am thinking it is not a torpedo. reporter: i will put $50 on it that this is a tuxedo. you have the satin stripe down the lake here, i have the patent leather shoes here, which was not a part of the original men's warehouse package. i got from a fellow named mike in 2008. this was assembled on-the-fly, on the fly, but it is by definition and according to men's warehouse, a chuck zito. neil: okay. i stand corrected. my young friend, you are splendid circularly as you are reportorial eight.

it is indeed a tux. if i would go to a big event like that, i would get something that looks like a tux. but i am not that an event that requires a tux. now we have pat buchanan has all sorts of cuts he does. >> do you have any thoughts on the president's speech, what did you make of it? to i the macbook and the president of the united stat plans on the politics of confrontation and conflict with republicans. and not conciliation with consensus.

neil: what you make about the markets? being concerned are anxious, we are beginning to see some futures market trading. i don't want to take too much away from asian trading. there are avariety of factors. if the president would've done something that would spook them, they would've sold off, but instead they have sold off on a incredible mark advance. what do you make of their take on what the president is doing? >> i think they are responding to what the fed has been doing.

there has been some good news. i will say that you mentioned medicare and medicaid and social security. specific programs in the speech. that tells me that he's not going in there to chop these things. the republicans are not going to give him any more tax increases. i don't think we're going to get a big deal with the president saying that he do this with medicare and medicaid and social security. and republicans coming aboard with tax hikes. neil: i think you are right. we should maybe run in the opposite direction now, but he is quite comfortable with just leaving things as they are. and if he can rely on may be getting a few more bucks out of the rich as far as a full-scale revamp of our social programs. that's just not in the works. if republicans think it will be,

extended sequestration cuts, have at it, but i don't see that happening. neil: here's what i see happening. i think barack obama has decided that he can't played a backroom deal with speaker boehner and the rest of them. he is going to be who he is. >> does is let obama be obama. when he brought up climate change, that tells me that what he is going to do is just like the assault weapon ban. he is going to go all out for the things he believes in your even if he loses, i thinn he believes that he will divide the country in a way that is to his advantage. i think he sees himself again as the ronald reagan of the liberal and progressive movement. he wants to be remembered by history as a fighting liberal and he feels that he is on the right side of history demographically and politically. that is the sense that i have

gone from him since his election. -- excuse me, reelection. neil: thank you very much. pat buchanan. you are looking at joe biden right there in a tux. that's what it's supposed to look like. bernie sanders, the senator on the fine state of vermont was the only fellow who was wearing a tie. looking very similar to our very own rich edson. i will just leave it at that. whatever your feelings of the whatever your feelings of the vice president of the united before copd... i took my son fishing every year. we had a great spot, not easy to find, but worth it. but with copd making it hard to breathe, i thought those days might be over. so my doctor prescribed symbicort. it helps significantly improve my lung function starting within five minutes. symbicort doesn't replace a rescue inhaler for sudden symptoms. with symbicort, today i'm breathing better. and that means...fish on! symbicort is for copd including chronic bronchitis and emphysema. it should not be taken more than twice a day.

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email marketing from constant contact reaches people in a place they're checking every day -- their inbox. and it gives you the tools to create custom emails that drive business. it's just one of the ways constant contact can help you grow your small business. sign up for your free trial today at constantcontact.com/try. neil: it's a very long night for the commander in chief. one of two inaugural balls going on right now. the president of he united states is guaranteed to stop by, that makes it a formal inaugural ball. he does pop into 38 various parties that are going on across

town. throughout the district area where these things are going on. there is one not too far away from the square. it was a shindig that even i was invited to. i don't go to parties that i am invited to. enough said. that will do it. that is not unusual for a second term president. especially when the economy contues to limp along. i am happy to have a contributor to fox news at this time. what do you think, dennis? and a lot has been menoned about the president's tone, the fact that he mentioned it so often that you were going against consensus, clearly sending a reminder to republicans as well. but this too shall be a priority. for us to see a spending priority. what did you make of that?

>> there were a lot of republicans from the the new york and new jersey areas. were a lot of hurricane sandy damage still is existing. the quetion is do you look at the facts, we have biological and social economic systems that are in play with rapidly changing global climate. seo keeps going up. it's important. maybe this is a problem that man has made? >> just recently it was that we could go forward and get $136 billion in investments from governments, they predict it would spur over $560 billion in investnt from the private sector. so actually there is new industries to be created,

whether it's geo- engineering or elsewhere. neil: you know congress' ability to take in the money and waste the money and lose the money. let's check out the president and first lady of the united states. ♪ [patriotic music playing] ♪ neil: what you make of that? >> you are investing in our country. when you say there is more certification, ice is retreating, glaciers are retreating.

we have to do something about this area and hopefully the president will provide some leadership. this is a world problem and we need everyone engaged. neil: all right, thank you very much. the president of the united states now up one of two inaugural balls that he will be attending what is the tux of the night. >> i would like to express the extraordinary gratitude, not just a of me as your commander in chief, but more importantly, think all the american people. i would like to start by thanking our leaders who are here. our hosts and advisers from all my branches of our military. [applause] the chairman of the chief of staff, general martin dempsey. neil: when we come back,

something that was not mentioned in all the talks back and forth today. either on the part of the president or any of his surrogates. and that is how we deal with this debt. not too many noted that. we were making an issue of that in various programs and appearances. a certain other washington watcher knows that as well. it's the key opportunity to reshape his next four years but maybe this country is very future. both sides say that the bodies are buried in the budget can be redone. david walker is my special guest from an increasingly colder nation's capital. ♪

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neil: a 20 minute speech. david walker, unmentionable. >> he did say deficit, he didn't think that overspending. he talked about the need for tax reform and allocating government programs and health care costs. this was a left of center speech. he was talking to his base. the issues that he wants to focus on, i think we have to see what he will say about the state of the union. that is the substance about governing. his budget will come in march. people are talking about that.

to me that is a very critical appointment. neil: looking at all of these issues might be critical to you, but they did not appear to be front and center to this president. they might pop up to be more important than they let on. that is in this address where you we start painting with brush broad strokes? >> the key is, as i said, this is about vision, this is about touching on issues that his base cares about. i'm really interested to see what is the state of the unit, what is his budget, and what does he do about it. neil: so many in the democratic party are saying things like this. you have heard that we want to follow up on more tax increases on the wealthy. we don't think that there is a real spending problem, as much as a health care spending problem. in other words, if they are talking and acting like that and trying to get an edge in these

negotiations, saying that maybe the way we are debating the issue is wrong, that is the problem, is it not? >> it is. the facts don't support that. clearly, health care spending is our biggest challenge. the fastest-growing expense under current law, once the interest rates go back to one reasonable levels will be interest. the federal government has gone from 2% to 23%. it is projected to go to 37% under our current course by 2040. the. >> and we have to do

comprehensive tax reform to generate more revenue. neil: but you have a brief period to do it? >> we need to do a deal in 2013. a grand bargain. they're not done and even years for obvious reasons -- reasons. neil: not to be cynical but that is a tall order. >> we will know all lot more when we hear the "state of the union" and see the budget. but republicans decided not to make the debt ceiling a big issue. was a three budget extension and a month supporter of no pay with no budget but we need to focus on spending. it is a problem but we do need more investment was critical infrastructure but they have to be coupled with

a concrete and forceful proposal to deal with deficits. neil: hope springs eternal as they went to the party of president has been reelected to undo what bill clinton tried to do not big government as the enemy but efficient doing the will of the people withoutasting the money but this president might be the most liberal since fdr not to know if his